Can Intel succeed as a pay-TV provider?

Chipmaking giant Intel has been looking to expand its business beyond the chips that power notebooks, desktops, servers, and a handful of other gizmos, but hasn’t met with much success. Now word comes from The Wall Street Journal (subscription required) and other sources that Intel is considering launching its own Internet-based pay-TV business. The idea is that instead of — or perhaps in addition to — buying television service from a cable company or satellite provider, you’d go straight to Intel, paying the company for access to real-time television programming delivered via the Internet.

How would such a service work? And does Intel have a chance to pull it off where companies like Google, Apple, and Microsoft have (so far) failed?

Intel TV

Here’s the basic idea: Although an eventual service might not carry the Intel brand name, Intel would manufacturer and sell set-top boxes that would leverage a user’s existing broadband Internet connection to bring live TV programming direct to the living room. This idea is often called “over the top” (OTT) programming because it’s delivered without the television provider’s (or Internet provider’s) direct involvement. Think about services like Netflix of Hulu: Subscribers are free to choose what services they connect to or pay for, and their ISP and cable providers aren’t in the loop or able to control what content users can and cannot access at any given time. The services use the Internet to go “over the top” of barriers cable companies and telcos have erected to control access to their customers.

An Intel pay-TV offering would operate on a similar principle, but with one crucial difference: It would offer live television channels. Where services like Netflix, Hulu, and Amazon Instant Video offer access to some current content (with Hulu offering next-day access to some television programming), Intel’s pay-TV offering would work just like regular TV. Users would be able to flip channels and instantly tap into live broadcasts — a huge benefit over existing Internet video services for folks who want to see new episodes as soon as they air, or for folks who are serious about their news, sports, and other live events.

Intel’s potential service would be based off set-top boxes built around Intel hardware and software. The company does have significant experience in the area. In addition to real-time video encoding and distribution technology from its video conferencing technology aimed at corporations and enterprise, Intel has recently been supplying the chips used in set-top boxes for cable providers like Comcast and France’s Iliad SA. Logitech’s poorly-received Revue was also powered by an Intel Atom processor, and Intel has inked a deal with Google to optimize Android for Intel chips — something that could help fuel future Google TV tie-ins, although is probably more directly related to smartphones and tablets. Intel also inked a $120 million patent deal with RealNetworks that seemed centered on RealNetworks’ next-generation video codec software.

The RealNetworks technology might prove to be important in overcoming a key limitation to IPTV services: bandwidth. Although Internet-savvy folks living in urban areas are increasingly used to the idea of broadband Internet in excess of 10mbps, one doesn’t have to go very far towards the edges of town to find bandwidth to the home limited to things like 1.5Mbps DSL. Intel may choose to target a possible IPTV service only at customers with fast broadband connections, but might also be looking to step around cable companies by offering a Internet-based TV solution that can work on lower-bandwidth connections in areas that are poorly served (or under-served) by traditional television providers. Technology that cam pack more high-quality video into limited bandwidth could be absolutely crucial to making a live television platform succeed.

The iPlayer Connection

Intel may have another ace up its sleeve in the form of Erik Huggers, one of the key players behind the BBC’s iPlayer. Although not without limitations and criticisms, over the last four years iPlayer has succeeded in in making online versions of BBC television and radio programming available to the public. (In the case of video programming, it was restricted to those with UK IP addresses.) Most recently, iPlayer has added pointers to content from non-BBC broadcasters as well as social networking components.

Intel has installed Erik Huggers as the general manager of its Intel Media group, and the company has set up a development shop in London to work on interface and user experience models for television programming. Although the case of making BBC programming available online is a bit more specific than a general television service (the BBC is a tax-supported public service broadcaster), there’s little doubt Huggers brings considerable experience to the effort, and understands what consumers are likely to demand of a live television service.